Source: AHS Advisory Pty Ltd
Source: AHS Advisory Pty Ltd
Source: AHS Advisory Pty Ltd

In this summary we look at comparative room occupancy, average room rate and revenue per available room (RevPAR) performance across Australia’s key cities and destinations, based on their actual performance for the year ending 2011 and our outlook for 2015. A copy of the full report with a detailed forecast for each destination can be downloaded from our website . We hope you will it useful and look forward to hearing from you if we can provide any further assistance.

Room Occupancy Comparison

Following a rapid recovery from the setback of the Global Financial Crisis (GFC), room occupancies in Sydney, Melbourne, Perth and Brisbane closed 2011 at record levels.

With a room occupancy of 85.8% for the year, Sydney just managed to stay ahead of Perth which recorded 85.1%. Perth recorded by far the strongest growth however, coming from 82.3% in 2010. This leaves little room for further growth with Sydney and Perth only showing minimal further growth, whilst Melbourne and Brisbane will also break 80%.
Darwin comes from behind with 71% in 2011 to potentially reach close to 78% by 2015. Adelaide, Canberra and the Gold Coast all experienced occupancy declines in 2011 whilst TNQ saw the beginning of a badly needed recovery, but still only reached 57% for the year.

Average Room Rate Comparison

In previous forecasts we have been bullish on our outlook for average room rate growth, expecting that hoteliers would seize the opportunity to make up lost ground on the back of world-beating room occupancy levels, especially in Sydney, Melbourne and Perth. However, it seems only Perth hoteliers have grabbed that bull by the horns and ran with it, recording almost 13% rate growth in 2011.

Our hope for Sydney was close to double digit figures and we are disappointed that Sydney hoteliers achieved only 6.8% growth in 2011. Melbourne did even worse, barely beating inflation with 2.7% rate growth, despite room occupancy in excess of 80%. This leaves Sydney still with the highest rates in the country, at $188 across the city, closely followed by Melbourne and Perth with $178 and $177 respectively. But not for long.

 The room rate ranking will have changed dramatically by 2015, when Perth will be Australia's most expensive city by quite some distance, unless the penny starts dropping in Sydney and Melbourne. Double digit growth for the next few years will drop back to 6% by 2015 as rates in Perth shoot towards $260, with Sydney languishing at $220 and Melbourne at $200. Brisbane seems more aggressive and by 2015 could outperform Melbourne with a city-wide room rate of $206.
Only in TNQ have rates declined in 2011 in a push to drive room occupancies. This will hopefully have changed by 2015, with room rates matching at least inflationary growth.

Revenue per Available Room Comparison

RevPAR performance sees a clear winner in 2011: Perth achieved an astounding 17% growth to record just over $150 across the city, ahead of Melbourne with $143 and hot on the heels of Sydney with $161. Whilst this phenomenal growth is unlikely to be maintained for many years, we expect Perth to record similar growth in 2012 before slowing to more modest single digit growth. Still, RevPAR by 2015 will be well ahead of all other cities, with increasingly dated stock and only limited new supply entering the market. Guests may complain, hoteliers will not.

On the other side of the scale, Adelaide and the Gold Coast experienced a RevPAR decline in 2011, owing to poor occupancy performance. TNQ did manage to achieve RevPAR growth through rate discounting, but only because this is a "discretionary" market that can effectively induce demand through attractive pricing. We strongly caution against this strategy for "mandatory" city markets that have a much more finite demand base that cannot be stimulated as much through discounting policies; it will only damage long-term rate potential!

For detailed projections for each destination, visit http://www.ahsadvisory.com.au/research/hotel-performance-outlook-august-2012/

Rutger Smits (AHS)
+61 414 414 513
AHS Advisory Pty Ltd